Question

You are purchasing a 25-year, zero-coupon bond from Gem, Inc. The yield to maturity is 8.68%...

You are purchasing a 25-year, zero-coupon bond from Gem, Inc. The yield to maturity is 8.68% and the face value is $1,000. What is the current market price?

PLEASE TRY TO BE A SIMPLE AS POSSIBLE, preferably using excel!

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Answer #1
Market price of zero coupon bond $ 124.81
Working:
Zero coupon bond does not pay coupon interest.So, price of zero coupon bond is only present value of face value.
Present Value of face Value of bond = Face Value *(1+i)^-n Where,
= 1000*(1+0.0868)^-25 i Yield to maturity 8.68%
= $ 124.81 n number of period 25
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